When you are overseeing a health system that spans a state and is branching out nationally and internationally, the numbers are large, but the job is the same as it is for hospitals across the country: provide great care, make sure patients are informed and involved, and reduce costs, says Delos M. “Toby” Cosgrove, MD, president and CEO of the Cleveland Clinic. Often cited by politicians and health care economists as an organization to emulate, the Cleveland Clinic has locations throughout Ohio and in Florida, Las Vegas, and Canada. Cleveland Clinic Abu Dhabi is currently under construction.

Changes in health care could mean Cosgrove will have to take up to $1 billion of costs out of the health system in five years, but he has a lot of ideas for making that happen, including provider consolidation, greater price transparency, more control on diagnostic testing, and the use of big data repositories to look for opportunities to be more efficient. The Cleveland Clinic’s operating model will make it all possible, he says.

“We are not-for-profit, we are physician-led, and we have a salary structure where there’s no financial incentive to do more or to do less for a patient’s care — it is simply to do what’s best for the patient. As physicians, we make decisions about what we are going to do as far as buildings or policies, etc. We run ourselves. Our model is the secret sauce.”

Cosgrove performed more than 22,000 operations during more than 35 years as a cardiac surgeon. He was a surgeon in the Air Force and served as chief of the Air Force Casualty Staging Flight in Vietnam. He joined the Cleveland Clinic in 1975 and was named chairman of the Department of Thoracic and Cardiovascular Surgery in 1989.

He has published nearly 450 journal articles and book chapters, one book, and 17 training and continuing medical education films. He has 30 patents filed for surgical products.

He earned his bachelor’s degree at Williams College and his medical degree at the University of Virginia. He completed an internship and residency in general surgery at the University of Rochester–Strong Memorial Hospital and a residency in cardiothoracic surgery at Brook General Hospital in London. He also completed residencies in cardiac surgery at Massachusetts General Hospital and Children’s Hospital of Boston.

He spoke recently with Managed Care Editor John Marcille.

Managed Care: The Cleveland Clinic is innovative and often cited by politicians and economists as a health system to watch. But you don’t have an insurance component. Why not?

Delos M. “Toby” Cosgrove, MD: We have probably close to 100 different contracts with insurers in various locations, and we have decided not to have our own. We don’t have the expertise to do that. It’s not in our areas of strength.

MC: Are your relationships with insurers evolving away from fee-for-service?

Cosgrove: Yes. We are taking on an increasing amount of risk. We have had a relationship with risk for a small number of patients for about five years, and we’ve learned a fair amount. We are also learning from our own employees — about 70,000 covered lives. It’s going to increase. We’ll see it ramp up both with private insurers and with the government.

MC: The intention of sharing risk is to reduce the escalation of costs. How does a hospital system interested in increasing its income cope with that?

Cosgrove: Quite clearly, we have to get cost structure down. As I go around the country talking to CEOs, every one of them is trying to figure out how to do that. I was at the White House recently having that sort of discussion. If we look out five years and things go the way they are projected, we are going to have to take a lot of costs out. For an organization like the Cleveland Clinic, that may be over $1 billion. Ultimately, that gets down to FTEs, which are about 50 percent of our costs. I had to talk to major networks across the country, and every single one of them is talking about a reduction in FTEs. Since health care has been an increasing source of employment over the last decade, that could have a major ripple effect across the economy. That is one of the things I brought up in Washington.

MC: If you reduce the number of FTEs, you will have to increase productivity, right?

Cosgrove: Yes.

MC: All of your physicians are on salary, so what is the incentive for the physician to keep productivity and quality up?

Cosgrove: They are both factors. We have one-year contracts and no tenure at the Cleveland Clinic. We have annual professional reviews where we look at everything an individual does. We take it very seriously. We probably spent 5,000 man hours last year doing our peer reviews. Salaries go up, they go down, and they stay the same, and that’s based on the individual’s contribution to the organization. Their contribution may be clinical, it may be research, it may be management, it may be business, but all of those things are taken into account.

MC: Is this well accepted?

Cosgrove: Our turnover rate is 4 percent, and our physician engagement scores are in the 99th percentile in the country.

MC: Is it a template for other health systems, or can other models be successful, too, with the changes in health care?

Cosgrove: I can’t comment on how other organizations are going to do, but with our model, we have been able to make very substantial changes in the organization with some rapidity, and we have been financially successful. More hospitals are trying to hire physicians and integrate, as we have.

MC: Economists are concerned that costs go up when providers consolidate. Are they right to be worried?

Cosgrove: That is probably true in some markets, but you have to take the long-term view of this. Most people think that the government is going to be paying for up to 75 percent of the health care bill in the foreseeable future—it is now about 50 percent. That is all non-negotiable. Regardless of whether you control all patients in your area, you get paid the same amount. So hospitals that are consolidating are figuring out how we can take duplication out of the system. Here’s a great example: We just had to build a new data center that cost $170 million. I can’t believe that every hospital across the country is going to be able to build its own data center. And many of us are developing the same sets of technology in various places, like care paths. Why do we all need to do that individually rather than take an opportunity to do it together, do it once? Look at health care as an industry. Twenty years ago, there were 35 airlines. That has consolidated down to four. Why is that? Well, they are a low-margin industry, like health care; there was duplication of services, like health care; and there was financial pressure and competition, like health care. Bookstores, banks, and consulting firms have consolidated and gotten bigger to spread the cost of running the business and to avoid duplication. It’s inevitable that you are going to see this in health care. We’re just starting to see the tip of it.

MC: What will the government’s role be?

Cosgrove: It could be an impediment to this happening, but in a free market, I think things will go fairly rapidly. HCA is a huge hospital chain. The Catholics are coming together across the country. And not-for-profits are increasingly getting into big chains of hospitals. Think about purchasing, about all the back-office stuff, and about the duplication of services. It’s inevitable.

MC: Where have you managed to cut costs?

Cosgrove: We’ve done pretty well. Last year we took $150 million out of purchasing, for example. We have a goal this year of taking 2 percent out of the cost of inpatient care and another 2 percent out of the cost of outpatient visits.

MC: You also eliminated 12,000 unnecessary lab tests. How did that work?

Cosgrove: We put stops in the electronic medical record. If you are ordering a test that has been done just a few hours before and doesn’t have any possibility of changing, or if we know something is not going to change day to day, those tests are not done. They are canceled. We have also looked at tests that are very expensive, like genetic profiles. Frequently a new resident will be excited to see if there’s some sort of genetic variant with a patient, so we hired a geneticist to review the orders for tests. We paid for that individual’s salary in the first month by eliminating inappropriate tests.

MC: You have contracts with 100 insurers. Are you making efficiency improvements in administering those?

Cosgrove: We have tried, but we haven’t had any major breakthroughs in communication with insurers. We are increasingly becoming interested in doing that, but so far, we haven’t seen huge partnerships. Various areas of the country are moving faster than others, and Cleveland has not been one of those areas.

MC: Is it a technological problem or a will problem?

Cosgrove: A will problem.

MC: You are investing quite a bit in information technology — you mentioned the expensive data center. Is that helping reduce the cost of care?

Cosgrove: Everybody was looking for the electronic medical record to come through and reduce the cost of health care. We have not seen that so far, nor have I talked with anybody who has demonstrated that. We have seen it improve the quality of health care, but it has been an enormous cost. In the last decade, we have spent $400 million just putting an electronic medical record in place, and that doesn’t count all of the training and updating — that’s just the physical aspect of getting it done. We are hoping that things like Explorys, a Cleveland Clinic spinoff that is bringing big data collections together, will begin to show us ways that we can improve efficiency. Explorys now has 40 million cases in its registries. As we begin to interrogate those, we are going to be able to learn quite a lot about how to make care more efficient.

MC: How do you evaluate the use of medical technology?

Cosgrove: Technology is constantly changing. Some of it is more expensive; some of it is less expensive. If you look at the broad scope of things, something like the polio vaccine has led to enormous savings. On the other hand, you certainly have to measure the quality and duration of life to justify cardiac surgery. We can’t look at health care delivery as simply a cost for society. It is also an enormous benefit for society. If you look at some of the early writings of Mark McClellan, he points out that the extension of life has contributed enormously to the growth of the GDP in the United States. Because people are living longer, they are paying taxes, they are being productive, and they are being consumers. So you have to look at both sides of that coin in order to make sense of the economic impact of health care. Politicians have looked at health care as simply a cost; no one has looked at any of the benefit.

With most things in health care, you don’t know what their long-term value is going to be in terms of payback to society until you’ve tried them.

MC: That’s a good point. With respect to new devices, drugs, and procedures, do you evaluate the incremental value of these in patient care relative to the price? A lot of new technology is very costly for small increases in value.

Cosgrove: There’s always a balance. Unfor­tunately, you don’t know when you are starting with a new expensive cancer drug whether it is going to work or not, or how many people it’s going to work for. With most things in health care, you don’t know what their long-term value is going to be in terms of payback to society until you’ve tried them.

MC: You work with your physicians, though, to educate them about value.

Cosgrove: We have tried to make physicians aware of what things actually cost. We posted the cost of various things in the operating room, for example, and it has changed physician usage substantially. Increasingly industry and physicians are coming together to understand that each bell and whistle that you add has to be evaluated not just in clinical usefulness but also in its value to the patient. We are at about 96 percent in usage of generic drugs when they are available. So we are looking hard at how we begin to bring things into the system and be fiscally responsible about it.

MC: Imaging is an area that is often cited as costly and overused. Are physicians given guidelines as to when MRIs are appropriate, for example?

Cosgrove: We are developing what we call care paths, and the care paths give guidance to the physician about where various aspects of diagnostics and treatment come into play. They have an eye toward reducing redundancy of tests, be they imaging or whatever. We have been very successful with strokes, for example.

MC: You have made a big effort to make information available and transparent to patients. What are the biggest challenges you’ve overcome in doing that?

Cosgrove: This is a project that started about 20 years ago, when as cardiac surgeons we thought it was our obligation to report our mortality rates — morbidities for all sorts of issues — to the cardiologists who referred patients to us. So we would meet with the cardiologists once a year and tell them about the mortality rate for coronaries, for aneurysms, etc. Then they began to ask us for copies of the slides, so we put together what we call an outcomes book for cardiac surgery. Then we said, what the hell, let’s just let it go nationally. We sent out about 50,000. We have been very committed to looking at our results over the years. We had a registry of cardiac surgery patients that went back to the early 1970s, where we would call these patients and follow them up. Sometimes we even had to send out private detectives to find out where they were, if they were alive, and how they were doing. We learned an enormous amount about the practice of cardiac surgery and what was the appropriate care, so it was as much a transparency act as it was an act of self-evaluation. And when I became CEO, I asked every one of our institutes to do the same sort of thing.

MC: And they complied?

Cosgrove: It was pretty easy in cardiac surgery to measure outcomes, because people were either dead or alive, which is a pretty clear endpoint. The endpoints were not so clear for things like diabetes, rheumatology, and dermatology, so I asked each one of the institutes to develop their own metrics. I said, “You can no longer say that you are great dermatologists; you have to give me some metrics that show me the outcomes.”

MC: You also give patients access to their full medical records.

Cosgrove: That’s the second aspect of this. We thought that it was important for patients to participate in their care. We made a decision about six years ago that we would make the chart available to anyone who wanted to see it. They had open access to it in paper form and now with the electronic medical record. We use Epic’s MyChart to give them password-protected access to their chart over the Internet. We sign up everybody who comes to the Cleveland Clinic for this. We will have the entire medical record on that by the end of the year.

MC: Are patients able to understand the information that’s recorded in the record, or are there problems with interpretation?

Cosgrove: We started out slowly. For example, diabetics can certainly understand their glucose level. As we put more and more information out there, there will be more questions about it. But that’s a good thing because patients are getting more involved in their care.